Embodiments of the present invention relate to a payment card processing system and method. More particularly, embodiments relate to a payment card processing system that allows a payment card to be used on two different payment networks.
A number of different types of payment card are available. For example, one common type of payment card is a credit card or bankcard issued by a bank or other financial institution. Many credit cards are issued pursuant to the rules of one or more credit card associations. For example, banks issue credit cards pursuant to the rules of associations or companies such as VISA®, MasterCard®, DISCOVER® or American Express® (e.g., for their Optima® brand cards). The bank that issues the credit card is referred to as the “issuer” of the card. Transactions using the card are routed through the “bankcard networks”. The routing typically depends on the card association under which the card is issued (e.g., a credit card issued pursuant to the MasterCard® rules will typically be routed using the MasterCard® processing networks).
These credit cards allow a cardholder to purchase goods and services at a wide number of merchant locations. Credit cards allow cardholders to pay off charges on a monthly basis or a cardholder may choose to pay a portion of the outstanding balance each month. Any unpaid balance typically is subject to interest charges. The cardholder may pay an annual fee as well. Often, issuers of these credit cards provide a number of different levels of card. For example, a bank may issue credit cards ranging from a standard card, to premium cards such as a “Gold Card” or a “Platinum Card”. Each level may have different annual charges, different interest rates, and different cardholder services. The issuer issues each account with a credit limit depending upon the credit worthiness of the cardholder. Each transaction conducted with the card may involve one or more interchange fees paid to the credit card association. For example, a merchant may be assessed an interchange fee based upon a percentage of the amount of each transaction conducted using a credit card.
A second type of card is a “charge card” such as the American Express® series of charge cards. Charge cards allow cardholders to charge purchases and services to the account. The cardholder is expected to pay the balance in full monthly. There is usually no interest charged. Charge cards often have a higher account limit than credit cards. This limit often is established based on a cardholder's usage history. There is an annual fee paid by the cardholder and the merchant typically is assessed an interchange fee. For example, the interchange fee assessed by American Express is usually higher than the interchange fee assessed by other bankcard networks. Charge card and bankcard transactions are typically processed using bankcard networks (such as those operated by VISA®, MasterCard®, American Express®, etc.).
A third type of card is a “private label” credit card. A private label credit card is a payment card issued by (or in conjunction with) a merchant such as Wal-Mart, Harrods, Sears, or Brooks Brothers. Some private label cards are issued and serviced by the merchant, while others are issued and serviced by a financial institution acting in conjunction with the merchant. From the cardholder's perspective, a transaction involving a private label card is similar to a transaction involving a bankcard or charge card—the cardholder presents the card for payment at a merchant and is later invoiced for the transaction. However, unlike most bankcard or charge cards, a private label card can only be used at merchant locations associated with the sponsoring merchant. For example, a Sears private label card can only be used for purchases at Sears (or designated Sears affiliates).
A private label cardholder may be required to pay the monthly balance in full (similar to a charge card) or may be allowed to revolve or carry a balance (similar to a credit card). The merchant pays the financial institution a fee similar to the interchange fee of a bankcard. This fee is usually lower than the interchange fee associated with bankcard transactions. The networks that are used to process private label card transactions are frequently different than the networks that are used to process bankcard transactions. For example, a private label card transaction is typically routed through a closed network or a limited access network that has been established or configured specially for a particular private label merchant. This limited access provides some benefits to private label cardholders. For example, private label merchants are able to offer incentives, promotions, and enhanced statement details which are better in many respects to those available through the bankcard networks.
Consumers enjoy the convenience and value-added services associated with these various types of payment cards. However many consumers find that they have too many payment cards, because they are attracted to the different benefits available from different types of payment cards. One advantage of the private label card is the availability of special promotional financing offers (such as “no interest for x months” promotions) and merchandise information from the issuer or associated merchant of the private label credit card. The primary advantage of the bankcard is the almost universal acceptance world wide of a VISA® card, MasterCard®, or DISCOVER® card. These cards also typically have lower interest rates.
Many merchants prefer that their customers use their private label card so that the merchant can use the monthly mailings as a vehicle of developing customer loyalty through special offers and other merchandising efforts. Merchants also prefer not to pay the higher interchange fees associated with generally available bankcards or the American Express® card. Merchants also like the idea of a dedicated credit line for use in their retail store. However, many customers are reluctant to carry any more plastic in their wallets than absolutely necessary.
A number of solutions to this problem have been suggested, including the issuance of payment cards which have multiple magnetic stripes (each encoded with different account numbers for each card replaced), magnetic stripes encoded with multiple account numbers, smart cards storing account information for each different account to be accessed, etc. None of these solutions provide a desirable solution to the technical problem of allowing a single payment card to provide features of different products. The technical problem is exacerbated by the fact that different types of payment cards may be routed using different networks having different protocols. Further, different accounts may be hosted on, or processed using, different processing platforms. Accordingly, there is a need for a payment card that provides merchants, cardholders, and issuers the benefits of both a bankcard and a private label card and which can be routed and used with existing bankcard and payment card networks and processing platforms.